Employers can boost morale in the workplace by showing employees just how valued they are by using a tax exemption
Trivial benefits exemption
The true success of a business lies in the dedication and loyalty of its employees.
Employers can provide so-called ‘trivial benefits’ to employees without having to declare these to HMRC. So exactly what are trivial benefits and how does this work?
Trivial benefits have always been available and in use by employers. Many employers provide this type of benefit to staff in the shape of tea, coffee, filtered water and even the occasional cakes and treats in the workplace including gifts such as a box of chocolates or flowers on special days and events such as birthdays.
As the name suggests, the benefit is something small and is not to be confused with ‘benefits in kind’ which are more substantive and can include a company car, gym membership and the like, which are taxable benefits. The rule change on trivial benefits now means that directors can afford to be a bit more generous towards staff as well as to themselves. However, as always with HMRC, there are rules that need to be followed to avoid being hit for tax or national insurance.
Many employers would go above and beyond for their employees and offering niceties like mobile phones and laptops, private healthcare and company cars on top of their regular salary are a way of showing their gratitude. However, these added extras, known as benefits in kind, must be declared to HMRC and the employer has to pay tax and National Insurance.
However, all is not lost and an employer can reward members of staff with smaller gifts and perks, also known as ‘trivial benefits’, and you won’t need to report them to HMRC or pay tax and National Insurance.
Being able to offer your valued employees’ a benefit that could protect their loved ones is worth its weight in gold especially as the offering to your employees is a tax exempt to you.
Most employees do not have lasting powers of attorney or wills in place. In general, people do not understand the adverse implications of failing to have lasting powers of attorney registered (for example, if an employee becomes mentally incapacitated during his/her lifetime) or dies without making a will- how would this impact the company and the employee’s family?
Being able to offer your employees the ability to have their lasting powers of attorney properly registered or putting a valid will in place adds value to your employees and their families lives.
Whitefield Law will work with you to offer your employees and their families important practical support in the event of their death or incapacity. Our will writing and lasting powers of attorney services will provide a valuable addition to any employee benefits package.
How can you provide such a service tax effectively to your employees?
The UK tax legislation includes a generous tax relief for what are described as trivial benefits. Trivial benefits can be help you provide legal services free of income tax and National Insurance Contributions.
The following conditions need to be satisfied.
- the employer can provide a benefit not exceeding £50 per employee (including VAT); and
- the benefit cannot be redeemed for cash or a cash voucher.
Whitefield Law can confirm that a £50 employer contribution in assisting an employee to update or write his will is a tax -free trivial benefit and a further £50 contribution for assisting with registering lasting powers of attorney is a separate tax- free trivial benefit. In total £100 contribution to two separate services will be tax exempt.
The benefit cannot be provided as part of any contractual obligation (including under salary sacrifice arrangements) and it should not be provided in recognition of a particular service performed (or in anticipation of such services) or as part of the individual’s normal employment duties.
If any of these conditions are not satisfied then the benefit is taxed in the normal way and if the cost of the benefit exceeds £50, the whole amount will be taxable rather than just the excess.
We at Whitefield Law can provide you with further information and can further direct you to the relevant specialised tax advisors who would be able to assist you in making such a service available to your valued employees.
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Call Bavani Naidu at 075 4887 0892 or email her directly on bnaidu@whitefieldlaw.co.uk